Labour targets deficit ahead of vote

LONDON The government promised on Wednesday to halve its huge budget deficit and curb bankers' pay in the hope of reviving its popularity before a national election next year.

The Conservatives are on course to win an election due by June, ending Labour's grip on power since 1997. An enduring recession, a politicians' expenses scandal and anger over the war in Afghanistan have eroded support for Prime Minister Gordon Brown's government.

Wooing wavering voters, Labour also promised to tackle failing schools, improve care for the old and ill, and make the streets safer in a broad programme announced by the Queen at the elaborate, annual state opening of parliament.

"We have taken the action that is necessary to cut the deficit in half over the next few years," Brown told parliament, pointing to plans to raise taxes for top earners and increase contributions for state benefits.

Many of the proposed measures had already been flagged, raising questions about whether any of them would change the political arithmetic that puts the Conservatives ahead by at least 10 percentage points in opinion polls.

"These things are a kind of shop window, but to be honest I don't think many people are in the market to buy Labour anyway," said Tom Bale, senior lecturer in politics at Sussex University.

Opposition leader David Cameron repeated his call for an election as soon as possible. "This is the shortest Queen's speech since 1997. They have run out of money, they have run of time, they have run out of ideas," he told parliament.

DEFICIT CUTTING

The government will enshrine in law its plans to cut the deficit in half over four years, but financial markets will have to wait until the prebudget report on December 9 for more details.

The budget deficit is set to exceed 12 percent of gross domestic product this year, raising concerns on markets about the future management of public finances.

Where to target tax rises and spending cuts to reduce the deficit will be a central theme in the election. Brown says Conservative plans to cut the deficit more quickly would endanger the recovery from the longest recession on record.

"We are the only party with policies to build a long-term recovery," Brown said, adding that economic stimulus measures would remain in place until recovery was assured.

With Labour conscious of the consequences of high unemployment during an election campaign, Brown announced more help for young people who are out of work.

Savings achieved because unemployment has risen less than expected will help to fund jobs or training for those who remain out of work. New university graduates will be offered internships or help in setting up their own businesses and unemployed 16 and 17 year olds will be offered more education.

Another law will allow a more powerful Financial Services Authority (FSA) watchdog to tear up bankers' contracts if they are deemed excessive and will require financial firms to set out living wills to wind themselves down in a future crisis.

The Conservatives say they will abolish the FSA and give greater oversight powers to the Bank of England, following heavy criticism of the handling of the credit crisis when the government spent billions of pounds rescuing banks.

"We are going to press ahead with our reforms. These won't be on the statute books for very long," an aide to Conservative economic policy chief George Osborne told Reuters.

The Queen greets Business Secretary Peter Mandelson (2nd L) during the annual State Opening of Parliament in London November 18, 2009.

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The Queen leaves Buckingham Palace in a horse drawn carriage to attend the State Opening of Parliament, in central London November 18, 2009.

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Yeoman of the Guard conduct a ceremonial search of the House of Lords before the State Opening of Parliament, in central London, November 18, 2009.

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Yeoman of the Guard prepare to conduct a ceremonial search of the House of Lords before the State Opening of Parliament, November 18, 2009.

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Yeoman of the Guard prepare to conduct a ceremonial search of the House of Lords before the State Opening of Parliament, November 18, 2009.

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The Queen is driven from Buckingham Palace in a horse drawn carriage to attend the State Opening of Parliament, November 18, 2009.

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Prime Minister Gordon Brown and his wife Sarah leave 10 Downing Street to attend the State Opening of Parliament, in central London November 18, 2009.

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The Queen is driven back to Buckingham Palace in a horse drawn carriage after attending the State Opening of Parliament, in central London November 18, 2009.

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The Queen is driven back to Buckingham Palace in a horse drawn carriage after attending the State Opening of Parliament, in central London November 18, 2009.

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The Queen and Prince Philip arrive for the State Opening of Parliament at the Houses of Parliament in central London November 18, 2009.

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Prime Minister Gordon Brown (L) and Conservative Party leader David Cameron walk through the Members' Lobby of the Houses of Parliament before the State Opening of Parliament, in central London November 18, 2009.

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Yeoman of the Guard prepare to conduct a ceremonial search of the House of Lords before the State Opening of Parliament, in central London, November 18, 2009.

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The Imperial State Crown is passed between members of the Royal household during the State Opening of Parliament at the Houses of Parliament in central London November 18, 2009.

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The Queen leaves Buckinhgham Palace in a horse drawn carriage to attend the State Opening of Parliament, in central London November 18, 2009.

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Britain's Chancellor of the Exchequer Alistair Darling and his wife Margaret leave 10 Downing Street to attend the State Opening of Parliament, in central London November 18, 2009.

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Members of the Guards prepare for the annual State Opening of Parliament, at the Houses of Parliament in London, November 18, 2009.

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Former Prime Minister Margaret Thatcher is helped to her seat by an usher, as she arrives for the State Opening of Parliament in the House of Lords, within the Palace of Westminster, in London, November 18, 2009 .

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Prime Minister Gordon Brown (R) and the Conservative Party Leader David Cameron, walk through the Members' Lobby of the Houses of Parliament in Westminster, after Queen Elizabeth's speech at the State Opening of Parliament, London, November 18, 2009.

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The Queen delivers her speech, during the State Opening of Parliament, in the House of Lords within the Palace of Westminster, London November 18, 2009 .

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Prime Minister Gordon Brown (L) and Conservative Party Leader, David Cameron, are seen attending the State Opening of Parliament on television screens at an a electrical store in Edinburgh, Scotland November 18, 2009.

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Business Secretary Peter Mandelson arrives at the Houses of Parliament during the annual State Opening of Parliament ceremony in London November 18, 2009.

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A ceremonial officer prepares for the annual State Opening of Parliament ceremony in London November 18, 2009.

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Prime Minister Gordon Brown (R) walks from The House of Lords with Conservative Party leader David Cameron after the State Opening of Parliament, London, November 18, 2009.

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The Queen walks with her husband Prince Philip through the Royal Gallery after delivering her speech during the State Opening of Parliament at the Houses of Parliament in London November 18, 2009.

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The Queen and Prince Philip leave the Houses of Parliament following the annual State Opening of Parliament in London, November 18, 2009.